Chinese mining machine company eyes the US IPO market

By: Damian Wood
Damian Wood
As an experienced trader, I work for myself managing my own small portfolio and also contributing on several investment… read more.
on Oct 31, 2019
  • Avalon mining machine maker Canaan Creative seeks to raise $400 million in its new quest for funding
  • This is the third time the Chinese firm is attempting to go public after two failed attempts
  • If successful, Canaan will use the cash to fund its artificial intelligence and bitcoin research activities

On the 28th of this month, Avalon Bitcoin miner manufacturer Canaan Creative filed a $400-million IPO on Nasdaq. Canaan Creative is among China’s biggest cryptocurrency mining hardware manufacturers specialized in making Avalon miners. The firm’s Monday filing at Nasdaq is its third attempt at raising additional capital after two failed tries in China and Hong Kong.

Canaan Creative has appointed Citigroup and Credit Suisse as its underwriters in its US IPO filing. In its prospectus, the firm has indicated that it intends to trade under the ticker name “CAN”.

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According to sources, the company used the $400 million as a place holder as it is yet to decide on the precise amount to be raised, the valuation, as well as the price per share.

 Canaan, based in Hangzhou, describes itself in the filed prospectus as the second leading manufacturer of bitcoin mining machines globally, and that it plans to use the cash to pay off some debts and finance its blockchain and artificial intelligence research.

The firm filed its IPO at a time when the markets are shrinking rather than warming up to new entrants. According to a report by Crunchbase, the company has for the first time this year recorded a revenue of $41.9 million, more than 85% down from the first half of 2018. Canaan also registered a 97% drop in its profits during the same duration. The filed records further show that it closed the year with $39.4 million in cash.

The Avalon maker did not specify in its prospectus why it decided to file its IPO at this time since its two failed attempts in mainland China three years ago and another in Hong Kong last year. While Canaan’s first two listings failed to kick off, sources indicate that the regulators were reluctant to list the company as they were not quite sure about its prospectus and business model. It can be argued that the past failed attempts at getting listed were not entirely the firm’s fault.

The filing comes just a week after Chinese President Xi Jinping encouraged the research and development of the blockchain technology, sending virtual currency and blockchain-backed companies’ shares soaring. Nonetheless, the future of bitcoin in China is still fuzzy as the country’s capital Bejing closed down all bitcoin trading platforms in 2017 and more recently in April this year, reports of a planned complete shutdown of bitcoin mining activities in the country also emerged.

Still, if it plays its cards right, Canaan could change the whole scenery and rise beyond the challenges it faces right from home.

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